Artificial Intelligence (AI) has a robust place in the Indian banking ecosystem. Many banking tasks are sorted with this technology, such as customer service, sales and marketing, risk management, and Know Your Customer (KYC) procedures.
However, AI has a dark side also which RBI took cognizance of and initiated the movement to address the ethical implications of it in the banking world.
Therefore, the Reserve Bank of India (RBI) has established an eight-member committee to build a Framework for Responsible and Ethical Enablement of Artificial Intelligence (FREE-AI).
This committee has one mission, i.e., seeing that AI integration within financial services adheres to principles of fairness, transparency, and accountability.
The committee is chaired by Dr. Pushpak Bhattacharyya, a distinguished professor at the Department of Computer Science and Engineering, IIT Bombay. Other notable members include Debjani Ghosh, Independent Director at the Reserve Bank Innovation Hub; Balaraman Ravindran, Professor and Head of the Wadhwani School of Data Science and AI at IIT Madras; and Abhishek Singh, Additional Secretary at the Ministry of Electronics and Information Technology.
This complete team will reflect a comprehensive approach to addressing the several challenges posed by AI adoption in finance.
The committee's primary objectives are:
Undoubtedly, the financial sector has grown exponentially with the adoption of AI technologies. This is the primary reason that banking experts want to address ethical challenges related to it.
Nathan Marlor and Andrew Parsons of Version 1, a digital transformation firm, highlighted the challenges of exploring AI in financial services, stating, "Understanding the ethical sphere around artificial intelligence is vital as the power of AI grows exponentially."
Similarly, as reported by the Financial Planning Association, there are certain ethical issues that are posed by AI in wealth management. Therefore, there is a high need for financial advisors to be aware of potential biases and ethical risks associated with AI integration.
Ethical concerns surrounding AI in financial services are not unique to India. KPMG conducted a global survey in January 2021 with the main motive of noting the employees behaviour regarding AI technologies. Nearly 50% of professionals in this industry were anxious about security and privacy threats posed by AI technologies. Additionally, 42% expressed concerns over the potential loss of human interaction in financial services due to AI integration.
As a matter of fact, the complete financial service industry spent $35 billion in AI technologies in 2021, out of which, $21 billion was provided by only the banking segment.
These were the main developments that experts wanted to take care of.
Even the European Central Bank printed a report which stated that there is no doubt that AI offers several benefits. However, it should be supervised properly.
Additionally, the same report said that 64% of businesses believe that AI will increase their productivity. On the contrary, 40% of business owners are concerned about technology dependence.
These are the main considerations which RBI watched and prepared a FREE-AI framework so that the central bank can work towards AI adoption in India's financial sector that is both responsible and ethical.
Artificial intelligence (AI) will evolve with time. Therefore, the banking ecosystem has to take appropriate steps to keep the system clean and transparent.
That is why RBI's powerful initiative the development of FREE-AI committee is a milestone towards integrating AI responsibly within India's financial sector.
This movement will be led by experts from diverse fields, and the central bank can address the ethical, technical, and regulatory challenges posed by the new technology.